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Members of the Roundtable are not bound by the
organization's policy decisions.

5.

Has any other member of the Business Roundtable or any
of its officers or employees contacted you or others in
your corporation for support of the organization's
positions? Have you been asked to contact any Members
of Congress or officials in the Executive Branch in
connection with matters discussed by the Business Round-
table? Please list the contacts made and the legislative
or other interest involved.

From time to time the Company has been contacted
by the Roundtable or its members with suggestions
for support of specific positions on legislative
or regulatory matters, sometimes with the request
that the Company contact members of Congress or
officials of the Executive Branch in connection
with the matters discussed.

The matters covered by the communications from the
Roundtable have related to a wide range of subjects
including such items as antitrust, federal energy
policy, tax reform, foreign investment, capital
formation, pension reform, etc.

The Company has from time to time contacted members
of Congress or officials of the Executive Branch
on matters discussed by the Roundtable in those
instances where the Company believed it was in
its own corporate interests and not solely because
of a request from the Roundtable.

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There is one additional matter on which I would appreciate the opportunity to supplement the record. As the corrected transcript of my testimony indicates, I undertook to try to determine whether my understanding that the Internal Revenue Service had not allowed deductions for entertainment of Government officials was correct and whether any in fact had been allowed (p. 61). This matter has now been reviewed, and I am advised by our tax people that for the Company's fiscal year 1971 (the most recent year that has been audited) and for several previous years the Internal Revenue Service, while generally taking the position on audit that expenditures for entertainment involving Government employees (and the expenditures for Company employees and other non-Government personnel present on those occasions) were not allowable, has allowed some claimed deductions for certain items such as business lunches for which the average cost per person present did not exceed $5, cost of hospitality suites and some other items.

APPENDIX III A

Northrop's Corporate Policy Directive (CPD) No. 46 is attached at Attachment 2. CPD No. 46 was first issued on January 28, 1963. As of April 1, 1973, the Directive is applicable to all Northrop subsidiaries, as well as the corporate offices and divisions. The procedures for implementing CPD No. 46 are incorporated in Corporate Finance Manual (CFM) 2–612 (Attachment 3) and CEM 2-628 (Attachment 4).

In addition, Frank W. Lynch, Senior Vice President-Administration, issued two related policy memoranda dated August 7, 1975 (Attachment 5) and October 27, 1975 (Attachment 6).

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I.

It is the policy of the company that expenditures for business conferences,
entertainment, hospitality and any other related expenses as may be required
by protocol, will be held to a minimuin consistent with good business practice.
It has been, and will continue to be, the policy of the company that no such
expenditures will be made where such expenditures are intended to affect,
might affect, or might reasonably be interpreted as affecting, the impartiality
of government or any other customer personnel with whom we come in contact
in the course of doing business.

II.

In no case will any reimbursement be made which is not in compliance with the
following criteria:

A. Standards of Conduct

Our relationships with our customers, both domestic and foreign, public
officials and others with whom we do business, shall be conducted in accor-
dance with the highest ethical standards. Northrop employees or consultants,
when acting on behalf of the company, shall maintain a strict adherence to the
published standards of conduct, laws, regulations or directives set forth from
time to time by those with whom we have relationships. Where DoD person-
nel are involved, there will be strict adherence to the provisions of DoD
Directive 5500.7, and where NASA personnel are involved, there will be
strict adherence to the applicable directive (Title 14, Code of Federal Regu-
lations, Chapter V, Part 1207, Subpart B), as amended.

B. Necessary Documentation

Sufficient records will be inaintained to insure that all appropriate expen-
ditures under IRS criteria can be claimed as U.S. income tax deductions as
ordinary and necessary business expenses, and as reimbursable costs under
government contracts, where applicable, to the extent permitted under the
Armed Services Procurement Regulations (ASPR), or any other contract
terms, rules and regulations.

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It is recognized that the nature of the company's business with foreign
governments may on occasion require business conferences, entertainment
or hospitality to be conducted in conformance with standards of official
international protocol. Such expenditures, when deemed necessary, must
have the prior approval of the responsible corporate officer, division gen-
eral manager or subsidiary president. Under no circumstances will any
other expenditure for business conferences, entertainment or hospitality be
reimbursed by the company in amounts greater than would be involved in
the extension of courtesies and normal amenities to acquaintances or friends.

III.

Corporate officers, division general managers, and subsidiary presidents will fully instruct all employees or consultants having authority to expend company funds for these purposes concerning the necessity for being particularly meticulous in their observance of this policy and all applicable laws, regulations and directives pertaining to such expenditures, whether applicable to the company or to governinent personnel or to any others with whom we have business relationships. Failure to comply with this policy shall constitute a basis for dismissal in the case of employees, or contract cancellation where consultants are involved.

IV.

Detailed instructions implementing this policy will be issued from time to time as part of the Corporate Policy Manual or supplementary publication.

Thoun You

Yus

Thoinas V. Jones
Chairman and
Chief Executive Officer

Applicable to:
Corporate Offices
Al Divisions
All Subsidiaries

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The policy of the company governing entertainment expense is outlined in
Corporate Policy Directive No. 46.

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Entertainment for business purposes includes activities normally considered
as amusement or recreation. However, entertainment excludes gifts, the
giving of which is considered to be inappropriate by the company. Entertain-
ment which is not an allowable cost under Government Contract Cost regula-
tions (see ASPR 15.205.11) should not be confused with business conference
expenses which are. (see CFM No. 2-628.)

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A.

Entertainment expense will be approved for reimbursement to employees
and consultants when:

1.

The expenditures are reasonable and necessary for business purposes, and

2.

The expense is fully supported by required documentation, as out-
lined in Paragraph IV-6, and

3.

The request fc: reimbursement is substantiated by including on Form
C-18B (Details of Entertainment Expense), in addition to the other
required information (see Paragraph IV-B). If applicable, relative
to DoD Directive 5500.7, Section VI-B, as amended, and relative to
NASA personnel, such entertainment is consisient with the provisions

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